Having built shopping malls in Tier II cities, Prozone Capital Shopping Centres Ltd, is now looking at bringing about a shift in the way real estate is sold in these markets with its affordable luxury housing projects. Prozone, which has already invested close to Rs1,000 crore in the realty business, is targeting Rs300 crore in annual sales across its three ongoing developments. Nikhil Chaturvedi, managing director, Prozone, spoke to Ashish K Tiwari about how the company is adopting novel strategies and the way ahead. Excerpts from the interview:
What motivated you to make a residential development foray?
Our partner Capital Shopping Centres (CSC) follows a very interesting business model in international markets. They generally acquire four times the land parcel required to develop a mall. After the mall comes up, the surrounding land parcel become valuable, which is then exploited through residential, commercial and related developments. The idea is to create long-term, debt-free annuity income-based assets (malls) through short-term disposable assets like residential and commercial developments. We realised the model made so much sense, especially in India where cost of debt is high.
So you decided to outright replicate the model in India?
A slight tweaking to the model had to be done as CSC’s overseas developments were on the outskirts of the city while the Indian projects had to be located in the centre. We also decided to simultaneously develop the residential catchments while doing malls. We also adopted a few interesting learnings from our JV partner’s overseas residential developments.
And what were these learnings like?
While CSC has sales and marketing office and show flats at construction sites much like in India, there was a differentiator: At the site they had a a very beautiful clubhouse with the best of facilities. An operational clubhouse gave customers a visualisation of the environment they would be living in. The clubhouse became the anchor of their development, as a result sales increased 1.5 times the competition and prices started shooting up at their sites due to limited inventory.
Your projects are largely located in Tier II Indian cities. Has the approach helped?
It has certainly made a paradigm shift in the way real estate is sold in Tier II markets. However, the most important challenge here is that the developer will have to be courageous enough to invest in building a state-of-the-art clubhouse at the start of the project. Financial soundness is very crucial for the success of this strategy. Prozone is among the few realty players that have negligible debt (Rs 10 crore). We decided to create the visible infrastructure on the ground. We chose to do 20-30 acre projects, where 6-7 acre can easily be carved out for gardens (with 30 feet trees relocated to the site), clubs and other leisure facilities. The residential developments would come up at the periphery, which is the case with our first project, Indore Prozone Palms, spread across 40 acre.
Selling luxury housing must be challenging in Tier II markets?
Luxury positioning in our case is not Italian marble and premium designer elements, but the thought and attention to details put to make the product. It’s about luxury tailored to buyers’ lifestyle with things such as sun deck and walk-in wardrobes, privacy, high railings, state-of-the-art safety and security, including swipe cards for all the residents and professional facility management. Our unit prices are in Rs2,800-3,500 per square feet range, very much comparable to what is available in that area. The difference is that we have created economies of scale and big spaces to give residents a luxury feel through efficient planning.
How many housing units are you targeting to deliver annually?
While we have developments planned in six markets spread across 17.9 million square feet, three – Indore (40 acre), Coimbatore (26 acre) and Nagpur (41 acre) – are active, while Aurangabad, Mysore and Jaipur are yet to start. Coimbatore and Nagpur will also have malls. All the developments will be completed in two phases at least and we are targeting to hand over 250 housing units every year. Our first mall is operational in Aurangabad and we are currently developing commercial offices.
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